Home Buying in Chicago>Question Details

Alan, Other/Just Looking in Chicago, IL

When it comes to buying an REO, how will property tax calculations be made? Based on the new purchase price, the previous exorbitant purchase price,

Asked by Alan, Chicago, IL Thu Jan 7, 2010

or some other basis?

Does the REO price become the new value upon which property taxes will be based? I have my eyes on an REO unit, but I don’t want to pay much more than its 2007 taxes. At least not for a few years. For example, the unit was purchased in 2006 for 700K and its taxes were around 8K per annum. If I were to buy the unit at 500K, would the taxes be around 8K, lower (because of the lower REO purchase price), or higher (based on what similarly built and located places are listing for)?

Also, what do people think REOs mean for the market and property taxes?

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Thanks all. Your comments are appreciated.
0 votes Thank Flag Link Thu Jan 7, 2010
Alan, the county sets the assessed value then each year town sets the tax rate itself based on how much they need for schools and parks. So you are appealing the assessed value (which would always keep changing), but even if they lower the assessed value the city's tax rate could increase. It is an arcane system full of loopholes and discrepancies, so you really cannot depend 100% on your taxes going down when you submit a bid. The lender uses existing taxes for approval purposes and so should you.
0 votes Thank Flag Link Thu Jan 7, 2010
JK et al,

If I appeal for a lower tax rate and the county resets the amount to a lower rate, what happens after those three years are up? Would the assessment continue to be based on the lowered valuation or on what similarly listed places in the same area are being listed at?
0 votes Thank Flag Link Thu Jan 7, 2010
You would appeal your assessment at the next opportunity (assessments are every three years) by completing an appeal form and mailing in your closing statement. I did this for my own home with success and without having to supply any comparables. In my situation, I live in Cook County.

Good luck!
Web Reference: http://www.1sthomegroup.com
0 votes Thank Flag Link Thu Jan 7, 2010
I mistakenly answered your question under my colleague Katie Murphy. We used the same computer and didn't log her out. Pardon the confusion.

Jeff Nobleza
Baird & Warner
0 votes Thank Flag Link Thu Jan 7, 2010
The short answer to your question is that no you will not see any immediate reduction in taxes should one purchase a property for much less than it once sold for. In some neighborhoods, they may even see an increase despite depreciating values(what the County considers Lakeview township in Chicago for example can expect a 10% increase in taxes from 2008 to 2009).

Cook County re-assesses values for real estate tax purposes every three years, what happens in between that time won't affect your assessed values (unless you appeal them).

One of the best ways to reduce real estate taxes is to have an attorney appeal them.

I tried to explain more on this topic but my explanation exceeded the number of characters allowed in a response.

Jeff Nobleza - Baird & Warner
0 votes Thank Flag Link Thu Jan 7, 2010
the tax due at close will be prorated on a daily basis to 100% the most recent tax bill. you can bet that there will be NO negotiating on who pays the tax and how much. as home values decrease, tax bills would decrease only in theory. on the contrary, property tax bills have risen as home values declined. the only option is to challenge the tax bill after closing on the property.
0 votes Thank Flag Link Thu Jan 7, 2010
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